Bheemanadham Srinivasa Rao, vs Edelweiss Asset Reconstruction ...
2022 Latest Caselaw 5273 AP

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             HON'BLE SRI JUSTICE C.PRAVEEN KUMAR
                                   AND
       HON'BLE SRI JUSTICE TARLADA RAJASEKHAR RAO

                   WRIT PETITION No. 1116 of 2022

ORDER: (Per Hon'ble Sri Justice C. Praveen Kumar)


1)    Heard learned Counsel for the Petitioners, the learned Counsel

appearing for Respondents and perused the record.

2) The present Writ Petition is filed, under Article 226 of the

Constitution of India, seeking the following relief:

"...to issue an appropriate writ, order or direction more particularly one in the nature of Writ of Mandamus, declaring the Sale Notice, dated 09.12.2021, issued by 1st Respondent contrary to the provisions of the SARFAESI Act and Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, as illegal, arbitrary and in violation of Articles 14, 21 and 300A of the Constitution of India and grant such other relief or reliefs..."

3) The averments made in the affidavit, filed in support of the Writ

Petition show that, the Petitioners herein availed loan for

development of business from Second Respondent, to a tune of

Rs.37,04,000/- on 02.05.2015, agreeing to repay the same in 180

monthly installments @ Rs.46,257/- per month. It is said that, due

to Covid pandemic, the Petitioners could not repay the installments

from the year 2020 onwards. The Petitioners requested the Second

Respondent to grant sometime for repayment of installments, which

was accepted by the Second Respondent.

4) While things stood thus, the First Respondent, who is a Trustee

of the Second Respondent, issued a Notice, dated 16.12.2019, under

the Arbitration and Conciliation Act, intimating about the

appointment of Arbitrator and the proceedings therein. It is the case

of the Petitioners that without issuing any notice under the

Securitization and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 ['SARFAESI Act'], the

First Respondent is proposing to conduct a public auction on

12.01.2022, which fact came to the knowledge of the Petitioners on

07.01.2022. It is the case of the Petitioners that, without issuing any

notice under the provisions of the SARFAESI Act, the Respondents

could not have proceeded further with the matter, more so, when the

provisions of Arbitration Act are already invoked. In view of the

above, the present Writ Petition came to be filed to declare the Sale

Notice, dated 09.12.2021, as contrary to the provisions of the

SARFAESI Act and Rule 8(6) of the Rules, as illegal, contrary and

violative of Articles 14, 21 and 300A of the Constitution of India.

5) Counters came to be filed by both the Respondents disputing

the averments made in the affidavit filed in support of the Writ

Petition.

6) (i) The counter filed by the First Respondent would disclose

that Petitioners availed financial facility to a tune of

Rs.1,13,00,000/- vide two loan accounts and entered into a Loan

Agreement with the assignor on 26.11.2015 and 02.04.2015,

respectively. As the Petitioners committed default in payment of

installments, their accounts were classified as Non-Performing Asset

['NPA'] on 01.01.2020. It is said that, a notice under Section 13 (2) of

the Act was issued on 07.12.2020, as the Petitioners failed to make

any payment or respond to the said notice. It was found that the

total amount liable to be paid by the Petitioners is Rs.68,86,759.58

paise. The demand notice was also published in two newspapers,

namely, Financial Express and Prajashakti on 28.01.2021. In view of

the default committed by the Petitioners, the Respondents proceeded to

take physical possession of the immovable property in accordance with

Section 13(4) of the SARFAESI Act on 10.11.2021. Copies of the notices

sent and proof of receipt of the same are filed along with the counter.

(ii) It is further stated that E-auction Sale Notice was issued on

09.12.2021, which came to be published in Prajashakti and

Business Standard on 11.12.2021. At that stage, the Petitioners

approached this Court, wherein, an interim order came to be passed

on 12.01.2022, directing the Respondents to proceed with the

auction process but not to confirm the sale for a period of two

months. Pursuant thereto, auction was conducted and one

Sanapathi Syamala was declared as a highest bidder.

(iii) Insofar as pendency of arbitration proceedings are concerned,

it is stated that, issuance of notice under Section 13(2) of the Act,

does not bar the proceedings under the SARFAESI Act. Having

regard to the circumstances stated above, it is stated that, the Writ

Petition may be dismissed, more so, when the Petitioners have an

alternative remedy under Section 17 of the Act.

7) (i) A Counter came to be filed by the Second Respondent

disputing the averments made in the affidavit filed in support of the

Writ Petition. It is pleaded that this Court ought not to have

entertained the Writ Petition in view of the Judgment of this Court in

Phoenix ARC Private Limited V. Vishwa Bharati Vidya Mandir

and Others 1 . It is further stated that, no Writ lies against the

answering respondent and the proper course for the Petitioners, is to

avail the remedy under Section 17 of the SARFAESI Act, more so,

when it is now functioning.

(ii) It is further stated that, Second Respondent has entrusted the

recovery process to First Respondent and, as such, Second

Respondent has nothing to do with the grievances of the Petitioners

and the remedy lies only against First Respondent. For the aforesaid

reasons, it is pleaded that the Writ Petition is liable to be dismissed.

8) The learned Counsel appearing for Petitioners would contend

that the Petitioners could not pay the installments due to Covid

outbreak and if some reasonable time is given, the Petitioners will

pay the amount due. Insofar as continuation of proceedings in

respect of invoking the provisions of the Arbitration Act, he fairly

submits that there is no bar for initiating proceedings under

SARFAESI Act.

(2022) 5 SCC 345

9) Coming to the maintainability of the Writ Petition, he would

submit that, since, there is no Presiding Officer at the Tribunal; the

Petitioners were forced to approach this Court. He reiterates his

contention that no notice under the provisions of the SARFAESI Act,

was served on the Petitioners, and as the same is in violation of the

principles of natural justice. Hence, a Writ Petition would lie and the

same has to be allowed, on that score.

10) Learned Counsel appearing for the Respondents disputes the

same. The Counsel took us through the documents to show that

notices issued were in-fact served on the Petitioners. In the absence

of any response from the Petitioners, to the notices issued, the

Respondents proceeded further in accordance with law, which

culminated into issuing an e-auction notice and, accordingly,

auction was held on the schedule date.

11) The point that arises for consideration is, whether the request

of the Petitioners, namely, to declare the sale notice, dated

09.12.2021, as illegal and incorrect, can be accepted?

12) The main ground taken by the learned Counsel for the

Petitioners is that, no notice, as contemplated under the provisions

of the SARFAESI Act, was served on the Petitioners. This, in our

view, appears to be incorrect, for the reason that, the documents

placed before us would prima facie indicate that notice under Section

13(2) was issued on 07.12.2020 and, thereafter, the notice under

Section 13(4) on 10.11.2021. Both these notices were published in

local dailies on 28.01.2021 and 16.11.2021. The acknowledgments

filed prima facie indicate proof of service of notices, which as said

earlier, is disputed by the learned Counsel for the Petitioners. An E-

auction notice, dated 09.12.2021, came to be published on

11.12.2021 proposing to conduct auction on 12.01.2022. Pursuant

to the interim order passed by this Court, auction was conducted but

the same is not finalized till date. However, it is said that, one

Sanapathi Syamala was declared as highest bidder in the said

auction.

13) In view of the facts stated above and since the auction

purchaser is not before this Court, it may not be proper for this

Court to adjudicate the matter on merits, more so, when a dispute

has been raised with regard to service of notice under Section 13(2)

and 13(4) of the SARFAESI Act, which goes to the root of the matter.

These disputed facts, in our view, cannot be gone into in an

application filed under Article 226 of the Constitution of India.

14) At this stage, learned Counsel for the Respondents also placed

before this Court the judgments of the Hon'ble Supreme Court in

Phoenix ARC Private Limited [1st cited supra] and Commissioner

of Income Tax and Others V. Chhabil Dass Agarwal, stating that

when there is an alternative remedy available, the Petitioners have to

avail the same.

15) Having regard to the disputed factual aspects involved and

since alternative remedy is available to the Petitioners, the Writ

Petition is dismissed giving liberty to the Petitioners to approach the

Tribunal under Section 17 of the SARFAESI Act, in which event, the

Tribunal may deal with the same in accordance with law

uninfluenced by the observations, if any, made in the order. No order

as to costs.

16) As a sequel, interlocutory applications, if any, pending shall

stand closed.

_________________________ C. PRAVEEN KUMAR, J

__________________________________ TARLADA RAJASEKHAR RAO, J

Date: 18.08.2022 SM...

HON'BLE SRI JUSTICE C.PRAVEEN KUMAR AND HON'BLE SRI JUSTICE TARLADA RAJASEKHAR RAO

WRIT PETITION No. 1116 of 2022 (Per Hon'ble Sri Justice C. Praveen Kumar)

Dt. 18.08.2022 SM